Asian stock markets rebounded from a five-year low today as a variety of rumours such as China cutting interest rates later in the day prompted investors to cover short positions before the weekend.
The recovery in stocks pushed the yen down from a 13-year peak hit against the pound, knocked safe-haven government bonds lower and helped oil prices edge up from an early slide.
Traders also cited talk that the Federal Reserve could cut interest rates in an emergency move later in the day or global central banks could conduct another round of joint interest rate cuts in the face of renewed market volatility.
The MSCI index of Asia-Pacific stocks outside Japan climbed 3.3 per cent, having slid 3.2 per cent earlier in the day to the lowest since October 2003.
Stock markets in Europe were expected to open more than 2 per cent lower, but S&P 500 futures were up 22 points, or 3 per cent after a sharp fall on Wall Street the previous session.
The benchmark US S&P 500 index fell 6.7 per cent an 11-year low on Thursday, amid anxiety about the fate of corporate titans such as General Motors, Ford Motor Company and Citigroup.
Citigroup, not long ago the world's most valuable financial firm, is considering selling parts of itself or a merger of some kind, a source told Reuters.
Fears of a deep global economic recession have pummelled investor confidence all week, spurring more liquidation of assets like stocks and commodities and pushing the yield on 10-year US Treasuries below 3 per cent for the first time in a half-century.
In Asia, South Korea's KOSPI led gains with a rise of almost 6 per cent, while Japan's Nikkei average added nearly 3 per cent.
The yen slipped after hitting a 13-year high against the pound and pushing back near an all-time peak struck against the Australian dollar last month.
The dollar was up 1.3 per cent against the yen at 94.90 yen, while sterling gained about 2 per cent to 140.75 yen after falling to a 13-year low of 137.67 yen in early trade.
Traders remained cautious about the outlook for markets despite the Friday recovery.
U.S. crude oil for January delivery edged up 31 cents to $49.74 a barrel after the December contract settled down $4 at $49.62, the lowest settlement since mid-May 2005. Oil has tumbled by nearly $100 from record highs in July.
Earlier, US stocks were at the lowest in more than a decade, and oil prices fell to three-and-a-half year lows, trading below $50 a barrel, as commodity prices slumped on expectations of reduced demand as economies contract.
There is also uncertainty over the US car industry. Democratic congressional leaders demanded executives at the Big Three car makers come up with a detailed business survival plan in exchange for their support of up to $25 billion in loans.
Investors priced in a one-in-three chance that the US Federal Reserve would cut its benchmark interest rate to 0.25 per cent from 1 percent on or before its last policy meeting of the year on December 16.
A growing number of Fed officials are talking about an unprecedented monetary expansion, with more economists expecting the base rate to hit zero.
Reuters